investment promotion

In light of recent political and social unrest in the region, foreign investors are taking a “wait-and-see” attitude to projects in the Middle East and North Africa. For the region’s investment promoters, this demands better, more proactive performance than in the past. Fortunately, although much remains to be done, the investment agencies of the 19 MENA governments are, as a group, off to a good start, according to a World Bank Group report released today.

This week, the World Bank Group’s Investment Climate Department hosted a stimulating discussion on the effectiveness of Investment Promotion Agencies (IPAs). The panel discussion coincided with the launch of the Investment Climate Department’s report on IPAs across the globe. MIGA co-sponsored the report and pioneered its methodology.

First, the bad news. This report makes for quite depressing reading for this startling finding: overall, the responsiveness of investment promotion intermediaries to investor inquiries is low, with 80% of IPAs not responding to sector-specific investor inquiries. This means that 80% of these organizations did not return a phone call or email from a foreign direct investment (FDI) “mystery shopper.” This translates to missed investment opportunities that are particularly needed now as the competition for FDI is so fierce.

When investors think about entering new locations their biggest need—and biggest challenge—is often how to access the information they need to help them make decisions. Reliable information—especially in emerging markets—helps to reduce investor perceptions of risk in an unknown location and reduces the transaction costs of establishing in a new market.

Moreover, you would think government investment promotion intermediaries (IPIs) should be keener than ever to make as much effort as possible to attract new investors in light of the cut-throat competition for lower levels of FDI since the crisis. Wouldn’t you? Well, it would seem like they aren’t. The World Bank Group's Global Investment Promotion Best practices 2012 survey (GIPB 2012) found that, worldwide, the responsiveness of IPIs to investor inquiries is shockingly low-with 80% of IPIs not even responding to sector-specific investor inquiries.